10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2023

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO

Commission File Number 001-38531

 

 

https://cdn.kscope.io/b40b2d074d6498a3fe224c212d10d7fb-img47478105_0.jpg 

 

Repay Holdings Corporation

(Exact name of Registrant as specified in its Charter)

 

 

 

Delaware

98-1496050

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

3 West Paces Ferry Road,

Suite 200

Atlanta, GA

30305

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (404) 504-7472

 

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Class A Common Stock, par value $0.0001 per share

 

RPAY

 

The NASDAQ Stock Market LLC

 

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

 

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

 

Large accelerated filer

Accelerated filer

 

 

 

 

Non-accelerated filer

Smaller reporting company

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

As of August 4, 2023, there are 94,700,866 shares of the registrant’s Class A Common Stock, par value $0.0001 per share, outstanding (which number includes 3,776,556 shares of unvested restricted stock that have voting rights) and 100 shares of the registrant’s Class V Common Stock, par value of $0.0001 per share, outstanding. As of August 4, 2023, the holders of such outstanding shares of Class V common stock also hold 5,861,271 units in a subsidiary of the registrant and such units are exchangeable into shares of the registrant’s Class A common stock on a one-for-one basis.

 

 

 

 


 

REPAY HOLDINGS CORPORATION

Quarterly Report on Form 10‑Q

For the quarter ended June 30, 2023

 

TABLE OF CONTENTS

 

 

 

Page

 

 

 

 

PART I – FINANCIAL INFORMATION

 

 

 

 

Item 1.

Condensed Consolidated Financial Statements

1

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

21

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

36

 

 

 

Item 4.

Controls and Procedures

36

 

 

 

 

PART II – OTHER INFORMATION

 

 

 

 

Item 1.

Legal Proceedings

38

 

 

 

Item 1A.

Risk Factors

38

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

39

 

 

 

Item 3.

Defaults Upon Senior Securities

39

 

 

 

Item 4.

Mine Safety Disclosures

39

 

 

 

Item 5.

Other Information

39

 

 

 

Item 6.

Exhibits

40

 

 

 

 

Signatures

41

 

 

 

 


 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements reflect our current views with respect to, among other things, anticipated benefits from our recent acquisitions, expected demand on our product offerings, including further implementation of electronic payment options and statements regarding our market and growth opportunities, and our business strategy and the plans and objectives of management for future operations. You generally can identify these statements by the use of words such as “outlook,” “potential,” “continue,” “may,” “seek,” “approximately,” “predict,” “believe,” “expect,” “plan,” “intend,” “estimate” or “anticipate” and similar expressions or the negative versions of these words or comparable words, as well as future or conditional verbs such as “will,” “should,” “would,” “likely” and “could.” These statements may be found under Part I, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere, and are subject to certain risks and uncertainties that could cause actual results to differ materially from those included in the forward-looking statements. These risks and uncertainties include, but are not limited to: exposure to economic conditions and political risk affecting the consumer loan market, the receivables management industry and consumer and commercial spending, including bank failures or other adverse events affecting financial institutions, inflationary pressures, general economic slowdown or recession; changes in the payment processing market in which we compete, including with respect to its competitive landscape, technology evolution or regulatory changes; changes in the vertical markets that we target, including the regulatory environment applicable to our clients; the ability to retain, develop and hire key personnel; risks relating to our relationships within the payment ecosystem; risk that we may not be able to execute our growth strategies, including identifying and executing acquisitions; risks relating to data security; changes in accounting policies applicable to us; the risk that we may not be able to maintain effective internal controls; and those risks described under Part I, Item 1A “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2022 and under Part II, Item 1A “Risk Factors” herein. The forward-looking statements speak only as of the date on which they are made, and, except to the extent required by federal securities laws, we disclaim any obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events. In light of these risks and uncertainties, there is no assurance that the events or results suggested by the forward-looking statements will in fact occur, and you should not place undue reliance on these forward-looking statements.

 


 

PART I

FINANCIAL INFORMATION

 

Item 1. Condensed Consolidated Financial Statements

 

REPAY HOLDINGS CORPORATION

Condensed Consolidated Balance Sheets

 

($ in thousands)

June 30, 2023 (Unaudited)

 

 

December 31, 2022

 

Assets

 

 

 

 

 

Cash and cash equivalents

$

103,784

 

 

$

64,895

 

Accounts receivable

 

33,889

 

 

 

33,544

 

Prepaid expenses and other

 

13,304

 

 

 

18,213

 

Total current assets

 

150,977

 

 

 

116,652

 

 

 

 

 

 

 

Property, plant and equipment, net

 

2,956

 

 

 

4,375

 

Restricted cash

 

24,137

 

 

 

28,668

 

Intangible assets, net

 

457,921

 

 

 

500,575

 

Goodwill

 

792,543

 

 

 

827,813

 

Operating lease right-of-use assets, net

 

9,485

 

 

 

9,847

 

Deferred tax assets

 

135,051

 

 

 

136,370

 

Other assets

 

2,500

 

 

 

2,500

 

Total noncurrent assets

 

1,424,593

 

 

 

1,510,148

 

Total assets

$

1,575,570

 

 

$

1,626,800

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

Accounts payable

$

18,830

 

 

$

21,781

 

Related party payable

 

 

 

 

1,000

 

Accrued expenses

 

26,128

 

 

 

29,016

 

Current operating lease liabilities

 

1,750

 

 

 

2,263

 

Current tax receivable agreement

 

 

 

 

24,454

 

Other current liabilities

 

541

 

 

 

3,593

 

Total current liabilities

 

47,249

 

 

 

82,107

 

 

 

 

 

 

 

Long-term debt

 

432,742

 

 

 

451,319

 

Noncurrent operating lease liabilities

 

8,480

 

 

 

8,295

 

Tax receivable agreement, net of current portion

 

181,596

 

 

 

154,673

 

Other liabilities

 

1,887

 

 

 

2,113

 

Total noncurrent liabilities

 

624,705

 

 

 

616,400

 

Total liabilities

$

671,954

 

 

$

698,507

 

 

 

 

 

 

 

Commitments and contingencies (Note 10)

 

 

 

 

 

 

 

 

 

 

 

Stockholders' equity

 

 

 

 

 

Class A common stock, $0.0001 par value; 2,000,000,000 shares authorized; 91,372,869 issued and 90,294,728 outstanding as of June 30, 2023; 89,354,754 issued and 88,276,613 outstanding as of December 31, 2022

 

9

 

 

 

9

 

Class V common stock, $0.0001 par value; 1,000 shares authorized and 100 shares issued and outstanding as of June 30, 2023 and December 31, 2022

 

 

 

 

 

Additional paid-in capital

 

1,132,720

 

 

 

1,117,736

 

Treasury stock, 1,078,141 shares as of June 30, 2023 and December 31, 2022

 

(10,000

)

 

 

(10,000

)

Accumulated other comprehensive loss

 

(3

)

 

 

(3

)

Accumulated deficit

 

(244,215

)

 

 

(213,180

)

Total Repay stockholders' equity

$

878,511

 

 

$

894,562

 

Non-controlling interests

 

25,105

 

 

 

33,731

 

Total equity

$

903,616

 

 

$

928,293

 

Total liabilities and equity

$

1,575,570

 

 

$

1,626,800

 

 

See accompanying notes to condensed consolidated financial statements.

1


 

REPAY HOLDINGS CORPORATION

Condensed Consolidated Statements of Operations

(Unaudited)

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

($ in thousands, except per share data)

2023

 

 

2022

 

 

2023

 

 

2022

 

Revenue

$

71,783

 

 

$

67,435

 

 

$

146,320

 

 

$

134,999

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

Costs of services (exclusive of depreciation and amortization shown separately below)

 

16,840

 

 

 

16,731

 

 

 

34,805

 

 

 

33,296

 

Selling, general and administrative

 

38,177

 

 

 

39,130

 

 

 

76,695

 

 

 

71,348

 

Depreciation and amortization

 

26,483

 

 

 

29,191

 

 

 

52,623

 

 

 

57,780

 

Change in fair value of contingent consideration

 

 

 

 

(1,050

)

 

 

 

 

 

(3,950

)

Loss on business disposition

 

149

 

 

 

 

 

 

10,027

 

 

 

 

Total operating expenses

 

81,649

 

 

 

84,002

 

 

 

174,150

 

 

 

158,474

 

Loss from operations

 

(9,866

)

 

 

(16,567

)

 

 

(27,830

)

 

 

(23,475

)

Other income (expense)

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

(910

)

 

 

(1,051

)

 

 

(2,070

)

 

 

(2,040

)

Change in fair value of tax receivable liability

 

4,056

 

 

 

19,450

 

 

 

(482

)

 

 

44,070

 

Other income

 

457

 

 

 

10

 

 

 

544

 

 

 

17

 

Other loss

 

(118

)

 

 

(150

)

 

 

(118

)

 

 

(150

)

Total other income (expense)

 

3,485

 

 

 

18,259

 

 

 

(2,126

)

 

 

41,897

 

Income (loss) before income tax benefit (expense)

 

(6,381

)

 

 

1,692

 

 

 

(29,956

)

 

 

18,422

 

Income tax benefit (expense)

 

1,051

 

 

 

(3,045

)

 

 

(3,306

)

 

 

(6,888

)

Net income (loss)

$

(5,330

)

 

$

(1,353

)

 

$

(33,262

)

 

$

11,534

 

Less: Net loss attributable to
   non-controlling interests

 

(687

)

 

 

(1,362

)

 

 

(2,227

)

 

 

(2,129

)

Net income (loss) attributable to the Company

$

(4,643

)

 

$

9

 

 

$

(31,035

)

 

$

13,663

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) per Class A share attributable to the Company:

 

 

 

 

 

 

 

 

 

 

 

Basic

$

(0.05

)

 

$

0.00

 

 

$

(0.35

)

 

$

0.15

 

Diluted

$

(0.05

)

 

$

0.00

 

 

$

(0.35

)

 

$

0.12

 

Weighted-average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

Basic

 

89,170,814

 

 

 

88,903,674

 

 

 

88,894,820

 

 

 

88,756,482

 

Diluted

 

89,170,814

 

 

 

113,250,565

 

 

 

88,894,820

 

 

 

112,866,991

 

 

See accompanying notes to condensed consolidated financial statements.

 

2


 

REPAY HOLDINGS CORPORATION

Condensed Consolidated Statements of Changes in Equity

(Unaudited)

 

 

 

Repay Stockholders

 

 

 

 

 

 

 

 

 

Class A Common
Stock

 

 

Class V Common
Stock

 

 

Additional
Paid-In

 

 

Treasury

 

 

Accumulated

 

 

Accumulated Other Comprehensive

 

 

Non-controlling

 

 

Total

 

($ in thousands)

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Stock

 

 

Deficit

 

 

(Loss) Income

 

 

Interests

 

 

Equity

 

Balance at March 31, 2022

 

 

88,817,111

 

 

$

9

 

 

 

100

 

 

$

-

 

 

$

1,101,432

 

 

$

-

 

 

$

(212,362

)

 

$

(2

)

 

$

38,242

 

 

$

927,319

 

Exchange of Post-Merger Repay Units

 

 

43,528

 

 

 

-

 

 

 

 

 

 

-

 

 

 

210

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(210

)

 

 

-

 

Release of share awards vested under Incentive Plan and ESPP

 

 

146,615

 

 

 

-

 

 

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Shares repurchased under Incentive Plan and ESPP

 

 

(13,532

)

 

 

-

 

 

 

 

 

 

-

 

 

 

(139

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(2

)

 

 

(141

)

Treasury shares repurchased

 

 

(100,803

)

 

 

-

 

 

 

 

 

 

-

 

 

 

-

 

 

 

(1,152

)

 

 

-

 

 

 

-

 

 

 

6

 

 

 

(1,146

)

Stock-based compensation

 

 

-

 

 

 

-

 

 

 

 

 

 

-

 

 

 

5,929

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(7

)

 

 

5,922

 

Tax distribution from Hawk Parent

 

 

-

 

 

 

-

 

 

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

(386

)

 

 

(386

)

Net income (loss)

 

 

-

 

 

 

-

 

 

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

9

 

 

 

-

 

 

 

(1,362

)

 

 

(1,353

)

Balance at June 30, 2022

 

 

88,892,919

 

 

$

9

 

 

 

100

 

 

$

-

 

 

$

1,107,432

 

 

$

(1,152

)

 

$

(212,353

)

 

$

(2

)

 

$

36,281

 

 

$

930,215

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at March 31, 2023

 

 

88,672,189

 

 

$

9

 

 

 

100

 

 

$

-

 

 

$

1,120,721

 

 

$

(10,000

)

 

$

(239,572

)

 

$

(3

)

 

$

32,000

 

 

$

903,155

 

Exchange of Post-Merger Repay Units

 

 

1,402,118

 

 

 

-

 

 

 

 

 

 

-

 

 

 

5,655

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(5,655

)

 

 

-

 

Release of share awards vested under Incentive Plan and ESPP

 

 

249,367

 

 

 

-

 

 

 

 

 

 

-

 

 

 

2

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(2

)

 

 

-

 

Shares repurchased under Incentive Plan and ESPP

 

 

(28,946

)

 

 

-

 

 

 

 

 

 

-

 

 

 

(174

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

3

 

 

 

(171

)

Stock-based compensation

 

 

-

 

 

 

-

 

 

 

 

 

 

-

 

 

 

6,516

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1

 

 

 

6,517

 

Tax distribution from Hawk Parent

 

 

-

 

 

 

-

 

 

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(555

)

 

 

(555

)

Net loss

 

 

-

 

 

 

-

 

 

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(4,643

)

 

 

-

 

 

 

(687

)

 

 

(5,330

)

Balance at June 30, 2023

 

 

90,294,728

 

 

$

9

 

 

 

100

 

 

$

-

 

 

$

1,132,720

 

 

$

(10,000

)

 

$

(244,215

)

 

$

(3

)

 

$

25,105

 

 

$

903,616

 

 

See accompanying notes to condensed consolidated financial statements.

 

 

3


 

REPAY HOLDINGS CORPORATION

Condensed Consolidated Statements of Changes in